Back To Currency Products

ETFInvestor links to a good but brief article by James Grant about a few of the currency products that are currently available including the two principle protected notes from Citi, CAQ and CZJ.

I have been public about buying CAQ personally but I did not buy for clients because of potential quirks inherent in the product.

I think I bought CAQ about six months ago, I know I paid $9.35 per share. Right now CAQ is at $9.70. That is a move of 3.75%, so big deal right? Who cares?

The point of this post is that although currency may become a more important tool to incorporate into a diversified portfolio wild success will mean small returns when compared to equities. I bought CAQ as a cash proxy not as a stock-type investment. I would be thrilled if the cash proxy extrapolates out to 7% for a full year.

I have written about currency products before and when the new currency ETFs come out I will write about them too. If you plan to tread into these waters you need to have the right expectations. These are more like cash substitutes not equities.

The Rydex Weak Dollar Fund (RYWBX) is leveraged to double the inverse of moves made by the dollar. With all of the attention paid to the dollar's drop the fund is only up 12% YTD. If you compare that to a gold stock or an energy stock YTD it looks lousy but that is the wrong comparison.

In terms of stocks/bonds/cash these products are high risk in the cash arena not low risk in the equity arena.